Spotlight: Responding to an Active Crisis
Crisis situations such as COVID-19 often call for heightened board oversight. The pandemic has forced many issuers to confront not only how to maintain adequate board oversight but also how to adapt existing oversight controls to manage operational uncertainties. Taken together, these concerns highlight that improving, strengthening and ultimately stress-testing ERM programs should be a primary concern for boards. In times of emergency or crisis, ERM processes and procedures should be thoughtfully reconsidered in order to keep pace with a company’s changing risk profile. The traditional process of annually identifying, assessing and reassessing risks may be unsuited to an environment of unprecedented uncertainty and market volatility. Boards are encouraged to adopt an open-minded and flexible perspective with an eye to translating risk into strategic value. Adapting to the new norm will require that boards re-examine conventional assumptions about risk oversight and actively seek opportunities to capitalize on the dynamic landscape. Adjustments such as scheduling more frequent meetings and/or the board chair more frequently liaising with management and committee chairs would be prudent in times of crisis to ensure the board is receiving timely, accurate and balanced information. At the same time, the board must be careful not to usurp management’s responsibility for day-to-day operations. COVID-19 has thrust the issue of board preparedness to the forefront of corporate stakeholder concern. The pandemic reminds us that while a rare and unexpected event with significant consequences can happen, that event’s adverse impact can be mitigated through attentive board oversight.
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Governance Insights 2020
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